The pre-market futures were up solidly on Monday morning, and the stock market opened higher, but sellers stepped up at the opening bell and took the indices to their lows of the day within the first half hour of trading. Stocks stabilized but couldn't make any intraday rally stick and the Dow closed down 97-points.
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The I-fund led the way with a moderate gain as the European markets seemed to hold onto gains while U.S. indices were selling off early. Bonds had another nice day.
Earnings season kicked off with Alcoa reporting after the close last night. Not usually a market mover, but their report was strong. The key is, earnings reports are going to start rolling out and we have a new catalyst for stocks.
The SPY (S&P 500 / C-fund) completed filling the open gap created last week. Early on on Monday, it had fallen below the support lines we have been watching , but closed off the lows and is now basically resting on them now - that is the bottom of the open gap and the 50-day EMA. It's not official yet but there's a possibility this chart is working on a lower high.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Wilshire 4500 (S-fund) pulled back but found support at the 50-day EMA. It remains in the narrowing apex of the wedge, which is actually a fairly bullish formation, but it must hold above the rising support line, and eventually break above the horizontal resistance line.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The Transportation Index hit the 20-day EMA and pulled back. That's not exactly a sign of strength during a bull market. Watch the recent lows for support or a potential breakdown. That will be a big test.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The EFA (EAFE Index / I-fund) filled the small downside open gap near 59, and there is still a portion of the overhead gap still open. The series of lower highs and lower lows continues so we're expecting a bearish outcome even if that gap gets filled.
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
The AGG (Bonds / F-fund) moved above the October highs again and closed at a new high. Yields keep falling, but is it just because stocks were down again, or is there something else going on here?
Chart provided courtesy of www.stockcharts.com, analysis by TSP Talk
Today is the 8th trading day in January and the January seasonality chart shows a short 3-day positive stretch starting tomorrow, followed by a 3-day negative stretch. That's most likely earning related. Unlike the primary indicators of seasonality over the holidays, this type of trend is just a secondary indicator, but I thought I'd bring it up because of the stark flip-flop.
Chart provided courtesy of www.sentimentrader.com, analysis by TSP Talk
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Thanks for reading! We'll see you back here tomorrow.
Tom Crowley
Posted daily at TSP Talk Market Commentary
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